NYSE:CUZ Cousins Properties Q3 2024 Earnings Report $27.67 +0.02 (+0.06%) Closing price 05/7/2025 03:59 PM EasternExtended Trading$27.64 -0.02 (-0.08%) As of 05/7/2025 04:35 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Cousins Properties EPS ResultsActual EPS$0.07Consensus EPS $0.67Beat/MissMissed by -$0.60One Year Ago EPS$0.65Cousins Properties Revenue ResultsActual Revenue$209.21 millionExpected Revenue$212.54 millionBeat/MissMissed by -$3.33 millionYoY Revenue Growth+5.20%Cousins Properties Announcement DetailsQuarterQ3 2024Date10/24/2024TimeAfter Market ClosesConference Call DateFriday, October 25, 2024Conference Call Time10:00AM ETUpcoming EarningsCousins Properties' Q2 2025 earnings is scheduled for Thursday, July 24, 2025, with a conference call scheduled on Friday, July 25, 2025 at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Cousins Properties Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 25, 2024 ShareLink copied to clipboard.There are 12 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to the Cousins Properties Third Quarter Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Friday, October 25, 2024. I would now like to turn the conference over to Pamela Roper, General Counsel. Operator00:00:25Please go ahead. Speaker 100:00:28Thank you. Good morning, and welcome to Cousins Properties' 3rd quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer Richard Hixson, our Executive Vice President of Operations Kennedy Hicks, our Executive Vice President and Chief Investment Officer and Greg Agzema, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon as well as furnished on Form 8 ks. In the supplemental package, the company has reconciled all non GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. Speaker 100:01:00If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website, cousins.com. Please be aware that certain matters discussed today may constitute forward looking statements within the meaning of federal securities laws and actual results may differ materially from these statements due to a variety of risks and uncertainties and other factors, including the risk factors set forth in our annual report on Form 10 ks and our other SEC filings. The company does not undertake any duty to update any forward looking statements whether as a result of new information, future events or otherwise. A full declaration regarding forward looking statements is available in the supplemental package posted yesterday and a detailed discussion of some potential risks is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly. Speaker 200:01:47Thank you, Pam, and good morning, everyone. We had a strong Q3 at Cousins. On the earnings front, the team delivered $0.67 a share in FFO and same property net operating income increased 4.4% on a cash basis. Leasing remained very strong. We leased 763,000 square feet during the quarter with a 7.2% cash rent roll up. Speaker 200:02:13This was our highest quarterly leasing volume since 2019. In addition, we executed compelling and accretive new investments and completed our inaugural unsecured bond issuance. These achievements are fantastic and continue to highlight the strength and resiliency of our leading Sunbelt lifestyle office portfolio and best in class balance sheet. Before discussing the quarter in more detail, I will start with a few observations on market. Fundamentals are improving. Speaker 200:02:44The existing supply of office buildings is declining as older buildings are converted or torn down and new construction is almost non existent. At the same time, leasing demand is accelerating as more companies return to the office. In a recent KPMG survey, 83% of CEOs said they expect their companies will shift back to requiring 5 days of office attendance sometime in the next 3 years. Amazon just made a 5 day a week announcement. We know of other Fortune 500 companies considering similar measures. Speaker 200:03:19Not surprisingly, national leasing volume during the Q3 was the highest since pre pandemic. We believe vacancy is reaching a peak and market tightening is not far off in the lifestyle office sector. With these tailwinds, our team remains strategically focused on driving earnings growth, while maintaining our best in class balance sheet. To do so, we are prioritizing both internal and external growth opportunities. Our portfolio was 88.4% occupied at quarter end, up from 87.6% at the start of the year. Speaker 200:03:57Given the quality of our real estate and the strength of our balance sheet, we intend to grow our leasing market share and drive occupancy back to more stabilized levels. Bank of America's expiration in Charlotte next year is a speed bump in that process. However, with the pickup in leasing activity and otherwise modest expirations through 2026, we believe there's meaningful upside in the cash flow of our existing portfolio in the intermediate term. Externally, we are executing on compelling investment opportunities. We closed on a joint venture acquisition of the Precinium Building in Midtown Atlanta and subsequent to quarter end, we purchased a whole loan collateralized by St. Speaker 200:04:40Ann Court in Uptown Dallas. Both are high quality assets and terrific locations. Kennedy will provide more specifics in a moment. The transactions highlight that we were open to a wide variety of opportunities, including debt, structured transactions, joint ventures and property acquisitions at this point in the cycle. However, our core strategy remains the same, invest in properties that already are or can be positioned into lifestyle office in our target Sunbelt markets. Speaker 200:05:13Near term accretion remains a priority. While there are signs of falling, the private capital markets remain challenging for office. Asset level debt and equity is limited and expensive. Many private equity investors have legacy issues in their portfolios and are on the sidelines. Conversely, the public markets show meaningful signs of improvement. Speaker 200:05:37Liquidity has grown in the unsecured debt market and spreads have tightened. Office REIT share prices have begun to rebound. This creates a compelling investment environment for Cousins as private and public market valuations finally converge. In conclusion, the office market remains highly bifurcated. There is little to no leasing demand or capital for commodity and older vintage properties. Speaker 200:06:03Values for these properties will reset so they can be reimagined or demolished. At the same time, the lifestyle office market continues to improve. New construction is at historic lows, while leasing demand is picking up. The market is rebalancing and a shortage of premium space is not far off. It is Econ 101. Speaker 200:06:28Cousins uniquely positioned for this environment. We built the company to thrive during all economic cycles and today we are in a highly advantageous position. We are in growing and vibrant Sunbelt markets. Bank of America ranks our portfolio as the highest quality among all office REITs. Our leverage is the lowest across the sector. Speaker 200:06:51The pricing on our unsecured bonds trade at the tightest spreads to treasuries among all traditional office companies. In short, we have great access to capital and are excited about the future for Cousins. Before turning the call over to Richard, I want to thank our talented Cousins employees who are the foundation of our success. They are dedicated, hardworking and provide excellent service to our customers. Richard? Speaker 200:07:18Thanks, Colin. Good morning. Our operations team continues to deliver outstanding results in 2024. In the Q3, our total office portfolio end of period leased and weighted average occupancy percentages were 91% and 88.4% respectively. Both metrics are essentially in line with last quarter. Speaker 200:07:40Some comments on occupancy. To start, this quarter's occupancy reflects the full impact of WeWork's give back space at 725 Ponce in Atlanta. We also had 2 portfolio changes this quarter. 1st, and as I outlined last quarter, Domain 4 in Austin dropped out of our operating portfolio upon Accruent's original lease expiration in August. 2nd, our recent acquisition, Precinium in Midtown Atlanta was added to the operating portfolio at our 20% share. Speaker 200:08:13With these portfolio changes, only 1.8% of our total square footage expiring in 2024 and about 290,000 square feet of signed new and expansion leases set to commence through year's end, we expect occupancy to trend modestly higher in the Q4. Looking to 2025, the long anticipated move outs of 1 Trust in Atlanta, Bank of America in Charlotte and a handful of other smaller ones should result in a downdraft in occupancy and temporary trough through the Q3. However, with otherwise low expirations and continued strong leasing demand, we expect to begin building back occupancy toward the end of 2025 beyond. This was an exceptional quarter for Cousins from a leasing perspective. During the Q3, our team completed 37 office leases totaling a very strong 763,000 square feet with a weighted average term of 7.7 years. Speaker 200:09:15This quarter's activity represents our highest volume since the Q2 of 2019 and was also one of our highest quarterly totals relative to our portfolio size. I also want to note that as of today, we have signed nearly the same volume of leasing year to date in 2024 than we signed in all of 2023. It's also encouraging that 611,000 square feet of our completed leases this quarter were new and expansion leases, representing 80% of our activity. Included in this quarter's activity was our recently announced 320,000 square foot full building lease with IBM at Domain 12 in Austin. IBM will officially assume the lease from Meta platforms as of January 1, 2026 and the lease was also extended from 2,031 through 2,040. Speaker 200:10:09I will speak to this lease more later. Regarding lease economics, 2nd generation cash rents increased again in the 3rd quarter by a solid 7.2%. Like last quarter, the Atlanta portfolio was the largest contributor with Austin and Tampa also seen solid rent rollouts. Average net rent this quarter came in at a record breaking $45.21 eclipsing our next highest quarter by over $6 This quarter, average leasing concessions, the sum of free rent and tenant improvements were $7.73 a decrease relative to the last few quarters. As a result, our average net effective rent this quarter also broke a company record at $34.57 At the market level, our Newhoff development in National continues to show good momentum. Speaker 200:11:02This quarter, the team completed a 22,000 square foot office lease with Boston Consulting Group, taking the commercial portion of the project to 44% leased. We are also in lease negotiations with 3 more office users totaling another 25,000 square feet and these would take the commercial portion of the project to 50% leased. As a reminder, multifamily leasing at Neuhof began in the 2nd quarter. Pleased to say that multifamily leasing has accelerated as we sit at 25% leased today compared to 25 21% at quarter end. This is impressive given we are in a seasonally slower time for apartment leasing. Speaker 200:11:42In Atlanta, high quality space continues to see the most demand reflected in positive absorption across Class A assets this quarter. Class A office vacancy also dropped this quarter for the first time since 2022 per JLL. Large transactions are also returning to the market with 7 leases signed in Atlanta this quarter of 75,000 square feet or greater. In our Atlanta portfolio, we signed 104,000 square feet of leases and 68% were new and expansion leases. Leases. Speaker 200:12:16Austin is also seeing a return of large block leasing activity with 2 of the largest new leases of the year signed in the Q3. JLL also recently noted that quarterly leasing activity in the market has increased every quarter this year with this quarter surpassing 1,500,000 square feet for the first time since mid-twenty 22. Our Austin team signed 399,000 square feet of leases this quarter, rolling up 2nd generation cash rents by 8%. That includes our new lease with IBM at Domain 12. We are incredibly excited about the IBM lease not just because of its size, but for several other important reasons as well. Speaker 200:12:56First, we view this lease as a strong signal that the technology sector will continue to be highly invested in the Austin market and particularly the domain over the long term. 2nd, as IBM takes occupancy, we believe the energy in the core of the domain will be better than ever. 3rd, 3rd, the extended lease term that came with this transaction significantly de risked the expiration profile of our domain portfolio. And last, this lease is a great example of the power of our platform and the types of creative solutions Cousins can provide regardless of the market. In Charlotte, our team remains focused on finalizing plans for the material redevelopment of 5th Third Center in Uptown, where as you know, Bank of America is set to move out 317,000 square feet at the end of July 2025. Speaker 200:13:50Pleased to report that during the quarter, we extended an existing 49,000 square foot sub lessee of Bank of America on a short term direct basis, which incrementally ladders 2 full floors of that upcoming exploration. We view the sub lessees decision to remain at the property for longer as a vote of confidence and the quality of the customer experience at the building. In Phoenix, CBRE noted that Class A office posted 69,000 square feet of positive net absorption in the quarter. In our portfolio, Hayden Ferry has experienced unprecedented tour activity with August seen 3 times the monthly average. We attribute this interest to the transformational redevelopment of this project, which is nearly complete. Speaker 200:14:38This quarter, our Phoenix team signed an impressive 171,000 square feet of leases, including a new lease with a 53,000 square foot customer that will occupy the first two floors of Hayden Ferry 1 in the second half twenty twenty five. We also signed a 52,000 square foot renewal and 23,000 square foot expansion of a technology company at Hayden Ferry 2. This transaction is particularly notable and that the need for this customer to expand was driven by an initiative to bring employees back to the office. According to JLL, the Tampa office market also remains strong and stable recording 2,300,000 square feet of leasing activity year to date. Further, sublease space decreased by nearly 600,000 square feet in the quarter. Speaker 200:15:28This quarter, our Tampa portfolio occupancy increased to 92% and the team signed a total of 6 leases and rolled up 2nd generation cash rents by 2.6 percent. I'll wrap up by touching on our leasing pipeline. Recall that subsequent to quarter 2nd quarter end, our late stage leasing pipeline strengthened markedly. One driver of that was our pending lease with IBM. However, even with that lease now signed, our late stage pipeline remains at a very healthy level. Speaker 200:16:00Our early stage pipeline is even more encouraging. So recall it takes time for that to translate to sign activity. In short, we remain optimistic about what lies ahead. As always, thank you to our hardworking and talented operations team for positioning us so well. I do want to extend a special thank you to our Tampa team. Speaker 200:16:23They are doing an incredible job with the recent hurricanes, not just during and after the storms, but as important leading up to them. They're proactive and professional approach to preparedness and support of one another was second to none and a big reason our properties performed so well with only minor damage. Kennedy? Speaker 300:16:44Thanks, Richard. Good morning, everyone. The acceleration in our leasing activity is coinciding with an acceleration of investment activity. I'm pleased to discuss 2 recently completed transactions, transactions that align with our core strategy to thoughtfully and accretively invest in Sunbelt lifestyle office environment. 1st, subsequent to quarter end, we acquired a mortgage loan that is secured by St. Speaker 300:17:08Ann Court, a 320,000 square foot Class A office assets built in 2,009 in the dynamic uptown Dallas sub market. The $138,000,000 loan was acquired at par, a basis of $4.31 per square foot. The loan has an initial maturity of December 7, 2024 24 and an interest rate of SOFR plus 366 basis points. At the time of the loan acquisition, the asset was 98% leased. As you are aware, we also recently acquired 2 mezzanine loans as a way to allocate capital and earn an attractive risk adjusted return during a time period in which the office sector has continued to reprice and a bid ask spread often remains between buyers and sellers. Speaker 300:17:57This is a continuation of that a bridge. In addition, in August, we acquired Fresenius, a 525,000 Square Foot Class A office building that is extremely well located at the intersection of Peachtree and 14th Street in the heart of Midtown Atlanta. We acquired the 2000 and 1 vintage building in an eightytwenty joint venture with Towne Lane for $83,000,000 or $158 per square foot on an all cash basis. Cousins owns the 20% interest and will provide property management, leasing and redevelopment services for the partnership. We're excited about this transaction for several reasons. Speaker 300:18:37First, the initial basis of $158 per square foot and opportunistic return profile is very compelling. This is reflective of the repricing that has occurred particularly for value add profile assets. The building has historically averaged above 90% leased, but with 74% leased at time of acquisition. With some long known move outs, the occupancy is projected to drop to approximately 50% over the next few quarters. As part of our acquisition, we are planning significant capital upgrades to modernize and reposition the building. Speaker 300:19:12These redevelopment efforts will begin in early 2025. This is a similar strategy that Cousins has successfully executed at several other properties recently, including the neighboring Promenade campus. And we're encouraged by early leasing interest in the building. All in, we anticipate that our stabilized basis will be less than half of today's placement costs, a significant competitive advantage. 2nd, we are excited to have executed this transaction with a fantastic partner in Town Lane. Speaker 300:19:42The joint venture allows us to participate in an attractive opportunistic investment in our backyard and leverage our strong development in Atlanta teams. Given the lease up and repositioning efforts needed, it'll take time for the investment to materialize into meaningful accretion. Therefore, partnering with Towne Lane on this transaction allows us to create long term value at the property level while maintaining significant acquisition capacity for other transactions that offer more near term accretion. Finally, we remain optimistic that this is just the beginning of an interesting transaction cycle for Cousins. One where we intend to press our competitive advantage. Speaker 300:20:22As Colin mentioned, asset level debt for office remains challenging to obtain and expensive. In the case of Fresenius, our ability to move quickly and close all cash with a highly regarded JV partner gave us a significant advantage over other interested parties. We continue to evaluate a variety of acquisitions and structured investments across our Sunbelt markets. Our guiding criteria is underlying assets that are or can be repositioned to be trippy lifestyle environments. We have ample capacity to acquire assets on our own and we'll also evaluate investment opportunities with like minded joint venture partners where it makes sense. Speaker 300:21:01I will turn the call over to Greg. Speaker 400:21:05Thanks, Kennedy. I'll begin my remarks by providing a brief overview of our results, spending a few minutes on our same property performance, then moving on to our capital markets and development activity before discussing our balance sheet and closing my remarks with an update to our 2024 earnings guidance. Overall, as Colin stated upfront, our 3rd quarter results were outstanding. 2nd generation cash leasing spreads were positive for the 42nd straight quarter. Leasing velocity was excellent and same property year over year cash NOI increased. Speaker 400:21:42It was also a very clean quarter. There were no significant unusual or non recurring items of note. Focusing on same property performance for a moment, GAAP NOI grew 4.2% and cash NOI grew 4.4% during the Q3 compared to last year. This continues a string of positive same property numbers that began in early 2022 with the most recent quarterly cash increases largely driven by occupancy gains at our San Jacinto building in Austin as well as our 100 Mill and Tempe Gateway buildings in Phoenix. I also wanted to take a moment to point out the lumpiness that can sometimes run through our quarterly same property expense numbers, oftentimes driven by property taxes. Speaker 400:22:30Property tax true ups as we receive actual assessments from the taxing authorities can push the quarterly numbers around quite a bit. So it's always best to use longer term timeframes when looking at expense numbers. Moving on to our capital markets activity. After receiving our investment grade credit ratings from Moody's and S and P in the Q2, we completed our inaugural unsecured bond issuance in the Q3. In mid August, we issued $500,000,000 of 5.7eight notes to 2,034. Speaker 400:23:04Investor demand was strong and it was widespread with over 100 investors submitting orders for $3,000,000,000 Subsequent to closing the offering, pricing on our bonds in the secondary markets have improved significantly. And as Colin said earlier, our bonds now trade at the tightest spread to treasuries among all traditional office REITs, providing us with a critical cost of capital advantage. Turning to our development efforts, the current pipeline is comprised of a 50% interest in Newhall in Nashville and 100% of Domain 9 in Austin. Our share of the remaining estimated development costs is approximately $50,000,000 which will be funded by a combination of our Newhall construction loan and our operating cash flow. We've revised the estimated stabilization of the commercial space in Newhall from the Q4 of 2025 to the Q2 of 2026. Speaker 400:24:01Construction is on schedule and leasing remains generally in line with our original underwriting. However, customer move in dates are a bit later than we originally forecasted. Looking at our balance sheet, net debt to EBITDA is an industry leading 5.1 times and our liquidity position is excellent. We ended the quarter with nothing outstanding under $1,000,000,000 credit facility and over $76,000,000 in cash and cash equivalents. We have ample balance sheet capacity as we explore the attractive transaction market Collin and Kennedy discussed earlier. Speaker 400:24:37I'll close by updating our 2024 earnings guidance. We currently anticipate full year 2024 FFO between $2.66 $2.70 per share with a midpoint of $2.68 This is up $0.025 from the prior guidance we provided in July and up $0.06 from our original guidance. The most recent increase is driven by lower short term interest rates, lower real estate taxes as we realize favorable assessment outcomes and new investment activity. Our earnings guidance remains clean. There are no speculative property acquisitions, property dispositions, development starts or capital markets transactions. Speaker 400:25:20If any of these do take place, we'll update our earnings guidance accordingly. Our guidance assumes the mezzanine loan on the Radius property in Nashville that we acquired during the Q2 is paid off at par prior to year end. The loan has a maturity date of June 2025. However, the borrower is currently pursuing an early refinancing and we assume Speaker 200:25:44they will be successful. Speaker 400:25:46It's a floating rate loan and open to prepayment with no penalty or defeasance. Our guidance also assumes the whole loan we just acquired on the St. Anne Court property and balance is paid off at par on the maturity date of December 7. Bottom line, our Q3 results are excellent and we are increasing earnings guidance for the 3rd straight quarter. I believe we are one of the few office REITs to forecast positive FFO growth in 2024. Speaker 400:26:15Our best in class leverage and liquidity position remains intact. Office fundamentals continue to improve with accelerating leasing activity and declining new supply and we continue to deploy capital into compelling and accretive investment opportunities. We were in the early innings of what is often a very productive part of the cycle for office owners and we enter it with a significant cost of capital advantage. We look forward to reporting our progress in the coming quarters. With that, I'll turn the call back over to the operator. Operator00:26:56Thank Your first question comes from Jeff Spector with Bank of America. Speaker 500:27:18Great. Good morning and congratulations on the quarter. First question, if we can focus on your comments around optimism around the transaction cycle. Are you planning to continue to leverage your current footprint in Teams? Do you see yourself looking into other Sunbelt markets? Speaker 500:27:42If you can talk about that a little bit more. Speaker 200:27:46Great. Good morning, Jeff. I would say that we are very constructive on the investment environment today for Lifestyle Office and we do remain very focused on the Sunbelt footprint that we operate in today. We're always evaluating new markets within the Sunbelt. I'd mentioned Raleigh, Speaker 600:28:10Durham, Metro and South Florida Speaker 200:28:10as markets that we continue Durham, Metro and South Florida as markets that we continue to evaluate. But I really wouldn't characterize them as new markets. We've been invested in both of those in the past. And so we'll continue to look at those. I would say there's nothing imminent in those markets. Speaker 200:28:27As today, we really don't feel opportunity constrained in the markets that we've got a presence in today and in boots on the ground. Speaker 500:28:38Thank you. And then my second question, I know you've talked you've compared a couple of times to 2019, which I assume is purposeful. So in terms of occupancy levels, can you provide any more color there? I know you talked about how 25 may play out, but I guess big picture, where do you you've compared again this quarter to 2019. 2019 was a very strong year. Speaker 500:29:08Can you talk a little bit more about that and maybe even tie in thoughts around concessions and free rent? Thank you. Speaker 200:29:17Sure, Jeff. It's Colin again. I think we continue to refer to 2019 in that in our performance today, if you were to strip out the year 2024 and compare our results to pre pandemic of 2019 as it relates to leasing volumes, net effect of rents, etcetera, it's kind of at or better. And so at Cousins, we're spending less time talking about return to office and more time about returning to normal. And our customers are back more in force. Speaker 200:29:56The leasing demand is running parallel with that. And so we believe that our occupancy today that was really less COVID related and some specific discrete move outs that we've dealt with over the last couple of years and one next year. But we believe we can return this portfolio to normalized levels of occupancy and that's certainly north of 90%. That might take us a year or 2 to reach those goals. And but the quality of the portfolio that we own today, the lifestyle portfolio that Bank of America, we appreciate ranking number 1 across all REITs is certainly has the capacity to do that. Speaker 200:30:38And I think broadly speaking, the office market as a whole is going to stabilize. You're going to see lower quality properties candidly disappear and repurposed while the highest quality buildings fill back up and that process is certainly underway today. And so that gives us a lot of optimism. And again, I think the performance of the company in 2024 largely mirrors or exceeds what we were where we were in 2019. Speaker 500:31:09Thank you. Operator00:31:12Your next question comes from Blaine Heck with Wells Fargo. Your line is now open. Speaker 700:31:18Hey, thanks. Good morning. Can you talk a little bit more about the St. Ancort mortgage acquisition? It's got a maturity date that's right around the corner. Speaker 700:31:27I know what Greg just said is in guidance. But can you run us through any of the potential alternative scenarios and whether you think there's much probability that something other than being paid back at maturity happens? Speaker 200:31:41Yes. Well, Blaine, let me just again step back again and strategically kind of highlight how we're looking at the market today, which again I've mentioned how constructive we are on lifestyle office for the obvious supply and demand reasons. At Cousins, we have while we certainly have an equity bias, we have a list of target buildings in our markets that we think are consistent with our lifestyle office criteria. And as we evaluate those buildings in this environment, we're willing to look across the capital structure so that we invest at the appropriate basis and with compelling risk adjusted returns. And so over the course of 2024, we've acquired 2 mezzanine loans, now one whole loan. Speaker 200:32:32We've done a joint venture acquisition and we'll continue to look at a wide spectrum of opportunities. You noted in the particular St. Ann Court loan that that does mature in December of this year. I'd say it's still way too early to speculate on that. But on the mezz and whole loans, our expectation is that we'll ultimately be paid off at maturity. Speaker 200:32:57However, those outcomes are still uncertain. And I think ultimately if the borrower does not pay us off, we'll certainly assess our rights and remedies and be prepared to take appropriate action. We're highly comfortable in the quality of the collateral in our loan basis, but I think it's just too early to speculate and I can't comment any specific conversations beyond that today. Speaker 700:33:23Okay. That's really helpful, Collin. And maybe just sticking with you here. I mean, as you guys kind of first made the decision coming out of the pandemic to really gather up dry powder for investment and commented on your intention to find ways to invest in the dislocated market. It seemed as though kind of everything was on the table, including large portfolio or even entity level transactions, which Cousins has done in the past. Speaker 700:33:50Is that still the case? Could we see anything, any kind of large transactions, portfolio transactions, entity level transactions? Or do you think in this environment, it's probably more likely to be one off smaller deals? Speaker 200:34:06Yes. Look, again, we're going to continue to be creative at Cousins in terms of how we access in complete transactions, again, focused on the appropriate basis and compelling risk adjusted and accretive returns and we're going to be flexible in how we invest. And I certainly in the early part of the cycle, as Kennedy mentioned, with bid ask spreads, you've got to be a bit more creative. I do think that we are starting to see private market values and public market values converge. And so we do think that's going to open up an opportunity to consolidate assets, more traditional property acquisitions. Speaker 200:34:55And that's certainly an opportunity to take a bespoke approach and really curate and select the right assets to add to the portfolio. We're again, we'll always evaluate any and all opportunities. But I do think probably the near term opportunity that's going to open up for us is in the property acquisition arena. Speaker 700:35:20Okay, great. Thanks Collyn. Speaker 600:35:23Thanks Blaine. Operator00:35:25Your next question comes from Anthony Paolone with JPMorgan. Your line is now open. Speaker 800:35:32Yes, thanks. I guess first just with the discussion about the desirability of just the best assets and you having a decent amount of activity there. Is there any prospect of build to suits or activating any of the development land in the near term? Speaker 200:35:52Sure, Tony. We are starting to see more or having more discussions with customers about their future real estate needs that could include build to suits and or other types of development. And I think in today's current capital markets, the challenge is with construction costs and the cost of capital, being able to find a balance and the appropriate return and rent that works for existing customers. So I do think you're going to see similar to the situation with IBM where existing buildings are going to fill up 1st, but I don't think development is that far behind. And I do think it's again very encouraging some of the conversations that we're having with customers who are thinking longer term, very specific about their space needs. Speaker 200:36:56And I think you'll see development in very select submarkets like The Domain as an example, be really not that far off. Speaker 800:37:07Okay. Thanks. And then just second one, as you think about 2025, can you maybe talk about what the mark to market looks like right now on the leases coming due and just how you think that might look? Speaker 200:37:26Sure, Johnny. I can't comment specifically on 2025 that will ultimately be dictated by which specific deals are completed, what renewals we do, what early renewals that we do. But again, I think we remain confident that we have an opportunity to consistently roll up rents. And again, to what degree will vary quarter to quarter, but I think this marked our 42nd straight quarter of roll ups and we're optimistic that we can continue that into 2025. Speaker 600:38:00Okay. Thank you. Operator00:38:03Your next question comes from John Kim with BMO Capital Markets. Your line is now open. Speaker 900:38:11Good morning. There was commentary I think Richard made on the Austin market and 2 large leases signed in the Q3. We all know about the IBM lease, but I was wondering who that second lease was with. Speaker 600:38:22And if you could just Speaker 900:38:23discuss the health of tech leasing in the market. Do you know that NVIDIA is looking for space and wondering if there's other large tech leases out there currently in the market? Speaker 200:38:39Sure. So the 2nd lease is PayPal, who signed a significant expansion at Domain Tower 2, which is on the fringe just outside of the core of the domain. So it kind of dovetails with the second part of your question regarding tech sector activity. I think that's again an example of a technology company making a long term decision and to increase their presence. And we know of a number of other technology companies that we already do business with and some others that we don't currently do business with that are searching in the Austin market specifically. Speaker 200:39:19So we feel good about the amount of activity that's starting to come to fruition. Speaker 900:39:28Okay. And then following up on the St. Ann Court mortgage debt, Have you been in contract with the owner, Harwood? And can you discuss where you think they're at as far as potentially opening up a relationship with you? Speaker 200:39:45Sure, John. As I mentioned earlier, we need to maintain confidentiality relative to any discussions we have with our borrowers across any of the loans that we own. And again, I think it's just too early to speculate. And certainly we'll continue to keep you up to date as these evolve. But I certainly need to maintain confidentiality relative to any discussions we may or may not have. Speaker 900:40:21I know Greg mentioned that it's you're assuming that mortgage debt gets paid off, but I imagine you're not making this investment just for 5 or 6 weeks of accretion. I'm just wondering that commentary was for guidance purposes or is that what you think will actually happen? Speaker 200:40:39Well, again, our we certainly need to make some assumption as it relates to our guidance. And again, our expectation on any and all loan investments that we make, we are going to within our guidance make it our expectation that we are paid off at maturity. Again, these outcomes are uncertain, but we felt like that was the appropriate assumption to make. And ultimately if a borrower does not pay us off, as I mentioned earlier, we'll assess our rights and remedies and go from there. Speaker 600:41:18Great. Thank you. Operator00:41:24Your next question comes from Nick Thielman with Baird. Your line is now open. Speaker 200:41:30Hey, good morning. First, I wanted to touch on the leasing pipeline, the kind of late stage pipeline that we got between new and renewal leasing. Richard, if you had that? Yes. So the mix is still leaning in our pipeline toward new and expansion leasing. Speaker 200:41:51On average over a long arc of time, it's more like a fifty-fifty mix, but we're still leaning toward new and expansion. A lot of that, I would note is driven by the fact that we still remain in a very good position from an exploration profile perspective. So we're going to naturally because of that, have more new and expansion activity. Helpful. And then Greg wanted to touch a little bit on some of the 2 large pending vacancies within the portfolio. Speaker 200:42:21What you're assuming for redevelopment costs for maybe 5th Third and if there's any additional spend needed at North Park with 1 Trust leaving? Speaker 400:42:31Sure. So we've talked about this several times on previous calls. We're still finalizing our plans in the 5th Third redevelopment in Charlotte. I think we'll have really specific or more specific answers for you in our February call. But as we sit here today, it's very likely to look like and cost like previous redevelopments that we've done. Speaker 400:42:53For example, Promenade in Atlanta would be a good example. But we'll have more details for you on that development in the February call. On North Park, I'm going to let Richard talk about North Park about that. Speaker 200:43:06Sure. I mean, we I would say stepping back, we are constantly evaluating every property in our portfolio, whether we need to be making improvements proactively to help drive leasing, help maintain quality at the level that we think our customers deserve and demand. And so specifically to North Park, we are actively looking at some improvements that we can make primarily around amenities in light of the OneTrust expiration in the Q1 of next year. But we have a handful of other properties where we are proactively making or reinvesting, if you will, across multiple markets. And this is Colin. Speaker 200:43:49I'll just add kind of some additional color, that I think kind of highlights the portfolio today is, if you'll recall, we sold over $1,000,000,000 of I'd say our lowest quality office from 2020 to 2022 and those were the assets probably that needed the highest amount of capital. And then over the last several years, we have substantially reinvested in buildings like Promenade, buildings like Hayden Ferry, 3,350 Peachtree, etcetera. So while we continue to evaluate some renovations and upgrades to properties like 5th Third and North Park, the portfolio overall is in terrific shape and high quality really from top to bottom. And so we think our portfolio and the amount capital needed relative to some others is just in a really good place. Speaker 600:44:49That's it for me. Thank you. Operator00:44:52Your next question comes from Yupal Rana with KeyBanc. Your line is now open. Speaker 600:44:59All right. Thank you. Speaker 500:45:01Colin, you talked about reaching 90% occupancy at some point in the future. Given you talked about some downdraft in occupancy through 3Q next year, do you feel like you're still on track to reach 90% occupancy and maybe even possibly 2026? Speaker 200:45:19Look, we're not going to set specific dates. But I do think once we I think the Bank of America expiration again, which has been long known, as we kind of hit that, I think that will certainly be a trough in occupancy and the pipeline of leasing in front of us and what we've already done, our hope is to recover that in very short order. And I did mention in 2026, we do have, I'd say fairly modest expirations through 2026. And so I think that's going to allow us to really move occupancy late in the second half of twenty twenty five and then certainly into 2026. But I'm just not prepared to put a specific date on it yet. Speaker 200:46:06But I do think certainly 90% is absolutely a goal of the company. I do think it's very achievable and ultimately our goal is to drive occupancy beyond 90% to as I said more stabilized levels. Speaker 500:46:25Okay, got it. That was helpful. And then, just quickly on the IBM lease, I was wondering if you can give us some color on how that took place and what's Meta's plans in the rest of the Austin market going forward? Speaker 200:46:40So again, the IBM lease, I think highlights the still the current challenges in the private capital markets. And some of you might recall that IBM actually had a signed lease to anchor a new development just adjacent to the domain that also had some speculative space and ultimately were unable to obtain Meta and ultimately find a really a win win win for Cousins, IBM and Meta. And I think it's terrific transaction. I think again, kind of highlights my earlier comments that I think we're going to see customers from a cost effectiveness find ways to utilize high quality space that's currently available and that will ultimately tighten the market and then lead to new development. But a terrific transaction for the company and I think all are excited about the outcome. Operator00:48:00Your next question comes from Peter Abramowitz with Jefferies. Your line is now open. Speaker 900:48:08Thank you Speaker 1000:48:09very much. Yes, one of your peers this quarter mentioned an uptick in interest for build to suits in a lot of the Sunbelt markets. Just curious if those conversations are picking up for you as well and if that's kind of part of the opportunity set you're considering with the capital you've raised? Speaker 200:48:30It is. I still believe that near term kind of acquisitions Speaker 600:48:33and investments are the most likely path Speaker 200:48:33for new investment for us. Regarding new development and build to suits are happening. And again, those conversations and discussions regarding a project like that usually start 1 to 2 years out before ultimately commencing. So as I said, those conversations are starting. If I had to speculate on how our investment activity would sequence, I think we'll see a period of time where investments are very attractive. Speaker 200:49:09But I'm excited that our team is are having those conversations so that in a year or 2 down the road, perhaps as the acquisition market becomes less compelling, we're ready to go with some highly attractive and hopefully pre leased development opportunities to continue a really attractive long term growth profile. Speaker 1000:49:33Thanks, Collin. And then just to go back to your comments around the dislocation between the public and the private market. I guess maybe a philosophical question, if you kind of step back and look at the environment, your cost of capital in the public market is pretty favorable. And like you said, things are pretty challenging in the private market. I guess, do you see anything that could sort of change that dynamic, particularly on the private market side and cause things to converge? Speaker 1000:50:02Or is there anything out there that maybe you think about could sort of change that dynamic over the next year or so? Well, it Speaker 200:50:12I mean, ultimately markets converge and 12 months ago, you would probably say the private side still had a more advantageous cost of capital than the public. I think that's probably reversed itself today, but longer term they'll likely converge. But I think that will take some time and part of that dislocation on the private side is so many private players, both debt and equity have their own share of legacy issues. And on the private side, those take longer to resolve than in the public market where there can be kind of instant liquidity. And so I do think that that is kind of the governor at the moment on private capital is trying to work through and clear their existing portfolio challenges before they're in a position to allocate new capital into the office sector. Speaker 1000:51:14All right. That's helpful. That's all for me. Thanks. Operator00:51:18Your next question comes from Dylan Brzezinski with Green Street. Your line is now open. Speaker 600:51:26Hi guys. Thanks for taking the question here. And not to beat a dead horse on a state and court loan, but just sort of curious, you talked about likely being paid off at maturity or that's being what's implied by guidance or possibly assessing your rights and remedies if you don't get paid off, but just sort of trying to get a sense for your appetite to extend this loan possibly at maturity? Speaker 200:51:51Look, we're going to again, any discussions and possible paths until those ultimately play out, we're going to continue to demand confidentiality and certainly those are just conversations that have to happen between borrower and lender. But again, I think I go back to this is we are highly comfortable in the quality of the collateral and the loan basis and there's a wide variety of outcomes. 1, as we mentioned that we are assuming in our guidance is that it's paid off and we'll continue to use that as our assumption and expectation and we'll continue to reevaluate as the process plays out and it could be fluid. Speaker 600:52:47And I guess as you guys are evaluating other investment opportunities, are there certain markets where you're seeing just a higher investable universe today given where either just more appetite in terms of sellers wanting to hit any bid that's there, whether it's on the debt or equity side? Speaker 200:53:06No, I'd say across our footprint, we think that there'll be opportunity. I think for us, it's important to note that all over the long term, we do want to continue to enhance our geographic diversification and grow our market share in places like Charlotte, in Nashville, in Dallas. We have a lot of conviction across all of our markets, including Atlanta and Austin. And so in this kind of unique period of time, we're going to invest opportunistically in any of our markets when we think really attractive situations come up where we can invest in high quality lifestyle office at attractive basis with compelling risk adjusted returns and we hope some kind of near to medium term accretion. Speaker 600:54:01Great. Appreciate those details, Collyn. Thank you. Thank you. Operator00:54:08Your next question comes from Brendan Lynch with Barclays. Your line is now open. Speaker 1100:54:14Great. Thank you for taking my question. There's great outcome between Meta and IBM and it sounds like tech demand in Austin is pretty strong. But do you anticipate any other tech tenants will scale back square footage within your portfolio? Speaker 200:54:33This is Richard. No, we don't anticipate any other significant scaling back. Speaker 1100:54:40Okay, great. Thanks. One quick one on St. Ann Court. The initial maturity date is in December, but is there an embedded extension option that you could discuss? Speaker 200:54:54There are certain extension options embedded in that required certain thresholds that will be met and unfortunately we just can't provide any more specifics beyond that. Speaker 1100:55:07Understood. And maybe one other quick one. It sounded like taxes were a consideration in the cash same property NOI coming down a little bit relative to the first half. Just wondering if there's anything else specific that you could call out that might be behind that decline? Speaker 400:55:28It's Greg. No, that was the largest component by far. Speaker 600:55:34Okay, very good. Thank you. Operator00:55:41Your next question comes from John Kim with BMO Capital Markets. Your line is now open. Speaker 900:55:48Thanks for taking a follow-up. I wanted to comment sorry, follow-up on your commentary on the BofA lease at Charlotte. You mentioned some short term direct leasing you've done with the sub lessee. I was wondering if you could provide any color as far as how long that term was and if there's any mark to market? Speaker 200:56:09Sure. The mark to market was more like a customary escalator kind of in line, so that really didn't move the needle at all. But the it's a 2 phased extension, if you will. So one of the floors will be expiring at the end of 2025 and then the balance will expire at the end of 2026. Speaker 900:56:34Are there any other opportunities to go direct with other sublease tenants? Speaker 200:56:40No, no. That really is the only one as far as going direct with subletsees. So a fairly unique situation, but I would say that we have very encouraging tour activity already even though BofA is yet to vacate the space. And Charlotte is pretty compelling from an early stage leasing pipeline perspective. Speaker 900:57:03Okay. And then we noticed that the $9,600,000 bankruptcy claim to SVP is no longer mentioned in your supplement. I realize it wasn't part of your guidance to begin with, but I was wondering what the status of that was? Speaker 400:57:18It's Greg. The bankruptcy process continues along slowly as they always are. But we still have that unsecured claim out there for $9,600,000 The bonds are still trading in a secondary market between kind of $0.55 $0.60 in the dollar. So that's still out there. It's just not in any of our guidance. Speaker 600:57:41Okay. Thank you. Operator00:57:44There are no further questions at this time. I will now turn the call over to Collin for closing remarks. Speaker 200:57:51Thank you all for joining us this morning and your interest in Cousins Properties. Please feel free to reach out to Greg and or Ronnie with any questions or follow-up. And we hope to see many of you out in Las Vegas at the NAREIT conference in November. Have a great day. Operator00:58:11Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCousins Properties Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Cousins Properties Earnings HeadlinesCousins Properties: The 5.5% Dividend Yield Is Not A BuyMay 6 at 5:18 PM | seekingalpha.comCousins Properties: The 5.5% Dividend Yield Is Not A BuyMay 6 at 5:02 PM | seekingalpha.com3..2..1.. AI 2.0 ignition (don’t sleep on this)I just put together an urgent new presentation that you need to see right away. In short: I believe we are mere days away from a critical announcement from a key tech leader… One that will officially ignite “AI 2.0” – and potentially send a whole new class of stocks soaring. May 8, 2025 | Timothy Sykes (Ad)Cousins Properties Inc (CUZ) Q1 2025 Earnings Call Highlights: Strong Leasing Activity and ...May 3, 2025 | gurufocus.comQ1 2025 Cousins Properties Inc Earnings Call TranscriptMay 3, 2025 | gurufocus.comCousins Properties Incorporated (CUZ) Q1 2025 Earnings Call TranscriptMay 2, 2025 | seekingalpha.comSee More Cousins Properties Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Cousins Properties? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Cousins Properties and other key companies, straight to your email. Email Address About Cousins PropertiesCousins Properties (NYSE:CUZ) ("Cousins") is a fully integrated, self-administered, and self-managed real estate investment trust (REIT). The Company, based in Atlanta and acting through its operating partnership, Cousins Properties LP, primarily invests in Class A office buildings located in high-growth Sun Belt markets. Founded in 1958, Cousins creates shareholder value through its extensive expertise in the development, acquisition, leasing, and management of high-quality real estate assets. The Company has a comprehensive strategy in place based on a simple platform, trophy assets, and opportunistic investments.View Cousins Properties ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Disney Stock Jumps on Earnings—Is the Magic Sustainable?Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release? Upcoming Earnings Monster Beverage (5/8/2025)Brookfield (5/8/2025)Anheuser-Busch InBev SA/NV (5/8/2025)ConocoPhillips (5/8/2025)Cheniere Energy (5/8/2025)McKesson (5/8/2025)Shopify (5/8/2025)Enbridge (5/9/2025)Petróleo Brasileiro S.A. - Petrobras (5/12/2025)Simon Property Group (5/12/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 12 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to the Cousins Properties Third Quarter Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Friday, October 25, 2024. I would now like to turn the conference over to Pamela Roper, General Counsel. Operator00:00:25Please go ahead. Speaker 100:00:28Thank you. Good morning, and welcome to Cousins Properties' 3rd quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer Richard Hixson, our Executive Vice President of Operations Kennedy Hicks, our Executive Vice President and Chief Investment Officer and Greg Agzema, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon as well as furnished on Form 8 ks. In the supplemental package, the company has reconciled all non GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. Speaker 100:01:00If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website, cousins.com. Please be aware that certain matters discussed today may constitute forward looking statements within the meaning of federal securities laws and actual results may differ materially from these statements due to a variety of risks and uncertainties and other factors, including the risk factors set forth in our annual report on Form 10 ks and our other SEC filings. The company does not undertake any duty to update any forward looking statements whether as a result of new information, future events or otherwise. A full declaration regarding forward looking statements is available in the supplemental package posted yesterday and a detailed discussion of some potential risks is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly. Speaker 200:01:47Thank you, Pam, and good morning, everyone. We had a strong Q3 at Cousins. On the earnings front, the team delivered $0.67 a share in FFO and same property net operating income increased 4.4% on a cash basis. Leasing remained very strong. We leased 763,000 square feet during the quarter with a 7.2% cash rent roll up. Speaker 200:02:13This was our highest quarterly leasing volume since 2019. In addition, we executed compelling and accretive new investments and completed our inaugural unsecured bond issuance. These achievements are fantastic and continue to highlight the strength and resiliency of our leading Sunbelt lifestyle office portfolio and best in class balance sheet. Before discussing the quarter in more detail, I will start with a few observations on market. Fundamentals are improving. Speaker 200:02:44The existing supply of office buildings is declining as older buildings are converted or torn down and new construction is almost non existent. At the same time, leasing demand is accelerating as more companies return to the office. In a recent KPMG survey, 83% of CEOs said they expect their companies will shift back to requiring 5 days of office attendance sometime in the next 3 years. Amazon just made a 5 day a week announcement. We know of other Fortune 500 companies considering similar measures. Speaker 200:03:19Not surprisingly, national leasing volume during the Q3 was the highest since pre pandemic. We believe vacancy is reaching a peak and market tightening is not far off in the lifestyle office sector. With these tailwinds, our team remains strategically focused on driving earnings growth, while maintaining our best in class balance sheet. To do so, we are prioritizing both internal and external growth opportunities. Our portfolio was 88.4% occupied at quarter end, up from 87.6% at the start of the year. Speaker 200:03:57Given the quality of our real estate and the strength of our balance sheet, we intend to grow our leasing market share and drive occupancy back to more stabilized levels. Bank of America's expiration in Charlotte next year is a speed bump in that process. However, with the pickup in leasing activity and otherwise modest expirations through 2026, we believe there's meaningful upside in the cash flow of our existing portfolio in the intermediate term. Externally, we are executing on compelling investment opportunities. We closed on a joint venture acquisition of the Precinium Building in Midtown Atlanta and subsequent to quarter end, we purchased a whole loan collateralized by St. Speaker 200:04:40Ann Court in Uptown Dallas. Both are high quality assets and terrific locations. Kennedy will provide more specifics in a moment. The transactions highlight that we were open to a wide variety of opportunities, including debt, structured transactions, joint ventures and property acquisitions at this point in the cycle. However, our core strategy remains the same, invest in properties that already are or can be positioned into lifestyle office in our target Sunbelt markets. Speaker 200:05:13Near term accretion remains a priority. While there are signs of falling, the private capital markets remain challenging for office. Asset level debt and equity is limited and expensive. Many private equity investors have legacy issues in their portfolios and are on the sidelines. Conversely, the public markets show meaningful signs of improvement. Speaker 200:05:37Liquidity has grown in the unsecured debt market and spreads have tightened. Office REIT share prices have begun to rebound. This creates a compelling investment environment for Cousins as private and public market valuations finally converge. In conclusion, the office market remains highly bifurcated. There is little to no leasing demand or capital for commodity and older vintage properties. Speaker 200:06:03Values for these properties will reset so they can be reimagined or demolished. At the same time, the lifestyle office market continues to improve. New construction is at historic lows, while leasing demand is picking up. The market is rebalancing and a shortage of premium space is not far off. It is Econ 101. Speaker 200:06:28Cousins uniquely positioned for this environment. We built the company to thrive during all economic cycles and today we are in a highly advantageous position. We are in growing and vibrant Sunbelt markets. Bank of America ranks our portfolio as the highest quality among all office REITs. Our leverage is the lowest across the sector. Speaker 200:06:51The pricing on our unsecured bonds trade at the tightest spreads to treasuries among all traditional office companies. In short, we have great access to capital and are excited about the future for Cousins. Before turning the call over to Richard, I want to thank our talented Cousins employees who are the foundation of our success. They are dedicated, hardworking and provide excellent service to our customers. Richard? Speaker 200:07:18Thanks, Colin. Good morning. Our operations team continues to deliver outstanding results in 2024. In the Q3, our total office portfolio end of period leased and weighted average occupancy percentages were 91% and 88.4% respectively. Both metrics are essentially in line with last quarter. Speaker 200:07:40Some comments on occupancy. To start, this quarter's occupancy reflects the full impact of WeWork's give back space at 725 Ponce in Atlanta. We also had 2 portfolio changes this quarter. 1st, and as I outlined last quarter, Domain 4 in Austin dropped out of our operating portfolio upon Accruent's original lease expiration in August. 2nd, our recent acquisition, Precinium in Midtown Atlanta was added to the operating portfolio at our 20% share. Speaker 200:08:13With these portfolio changes, only 1.8% of our total square footage expiring in 2024 and about 290,000 square feet of signed new and expansion leases set to commence through year's end, we expect occupancy to trend modestly higher in the Q4. Looking to 2025, the long anticipated move outs of 1 Trust in Atlanta, Bank of America in Charlotte and a handful of other smaller ones should result in a downdraft in occupancy and temporary trough through the Q3. However, with otherwise low expirations and continued strong leasing demand, we expect to begin building back occupancy toward the end of 2025 beyond. This was an exceptional quarter for Cousins from a leasing perspective. During the Q3, our team completed 37 office leases totaling a very strong 763,000 square feet with a weighted average term of 7.7 years. Speaker 200:09:15This quarter's activity represents our highest volume since the Q2 of 2019 and was also one of our highest quarterly totals relative to our portfolio size. I also want to note that as of today, we have signed nearly the same volume of leasing year to date in 2024 than we signed in all of 2023. It's also encouraging that 611,000 square feet of our completed leases this quarter were new and expansion leases, representing 80% of our activity. Included in this quarter's activity was our recently announced 320,000 square foot full building lease with IBM at Domain 12 in Austin. IBM will officially assume the lease from Meta platforms as of January 1, 2026 and the lease was also extended from 2,031 through 2,040. Speaker 200:10:09I will speak to this lease more later. Regarding lease economics, 2nd generation cash rents increased again in the 3rd quarter by a solid 7.2%. Like last quarter, the Atlanta portfolio was the largest contributor with Austin and Tampa also seen solid rent rollouts. Average net rent this quarter came in at a record breaking $45.21 eclipsing our next highest quarter by over $6 This quarter, average leasing concessions, the sum of free rent and tenant improvements were $7.73 a decrease relative to the last few quarters. As a result, our average net effective rent this quarter also broke a company record at $34.57 At the market level, our Newhoff development in National continues to show good momentum. Speaker 200:11:02This quarter, the team completed a 22,000 square foot office lease with Boston Consulting Group, taking the commercial portion of the project to 44% leased. We are also in lease negotiations with 3 more office users totaling another 25,000 square feet and these would take the commercial portion of the project to 50% leased. As a reminder, multifamily leasing at Neuhof began in the 2nd quarter. Pleased to say that multifamily leasing has accelerated as we sit at 25% leased today compared to 25 21% at quarter end. This is impressive given we are in a seasonally slower time for apartment leasing. Speaker 200:11:42In Atlanta, high quality space continues to see the most demand reflected in positive absorption across Class A assets this quarter. Class A office vacancy also dropped this quarter for the first time since 2022 per JLL. Large transactions are also returning to the market with 7 leases signed in Atlanta this quarter of 75,000 square feet or greater. In our Atlanta portfolio, we signed 104,000 square feet of leases and 68% were new and expansion leases. Leases. Speaker 200:12:16Austin is also seeing a return of large block leasing activity with 2 of the largest new leases of the year signed in the Q3. JLL also recently noted that quarterly leasing activity in the market has increased every quarter this year with this quarter surpassing 1,500,000 square feet for the first time since mid-twenty 22. Our Austin team signed 399,000 square feet of leases this quarter, rolling up 2nd generation cash rents by 8%. That includes our new lease with IBM at Domain 12. We are incredibly excited about the IBM lease not just because of its size, but for several other important reasons as well. Speaker 200:12:56First, we view this lease as a strong signal that the technology sector will continue to be highly invested in the Austin market and particularly the domain over the long term. 2nd, as IBM takes occupancy, we believe the energy in the core of the domain will be better than ever. 3rd, 3rd, the extended lease term that came with this transaction significantly de risked the expiration profile of our domain portfolio. And last, this lease is a great example of the power of our platform and the types of creative solutions Cousins can provide regardless of the market. In Charlotte, our team remains focused on finalizing plans for the material redevelopment of 5th Third Center in Uptown, where as you know, Bank of America is set to move out 317,000 square feet at the end of July 2025. Speaker 200:13:50Pleased to report that during the quarter, we extended an existing 49,000 square foot sub lessee of Bank of America on a short term direct basis, which incrementally ladders 2 full floors of that upcoming exploration. We view the sub lessees decision to remain at the property for longer as a vote of confidence and the quality of the customer experience at the building. In Phoenix, CBRE noted that Class A office posted 69,000 square feet of positive net absorption in the quarter. In our portfolio, Hayden Ferry has experienced unprecedented tour activity with August seen 3 times the monthly average. We attribute this interest to the transformational redevelopment of this project, which is nearly complete. Speaker 200:14:38This quarter, our Phoenix team signed an impressive 171,000 square feet of leases, including a new lease with a 53,000 square foot customer that will occupy the first two floors of Hayden Ferry 1 in the second half twenty twenty five. We also signed a 52,000 square foot renewal and 23,000 square foot expansion of a technology company at Hayden Ferry 2. This transaction is particularly notable and that the need for this customer to expand was driven by an initiative to bring employees back to the office. According to JLL, the Tampa office market also remains strong and stable recording 2,300,000 square feet of leasing activity year to date. Further, sublease space decreased by nearly 600,000 square feet in the quarter. Speaker 200:15:28This quarter, our Tampa portfolio occupancy increased to 92% and the team signed a total of 6 leases and rolled up 2nd generation cash rents by 2.6 percent. I'll wrap up by touching on our leasing pipeline. Recall that subsequent to quarter 2nd quarter end, our late stage leasing pipeline strengthened markedly. One driver of that was our pending lease with IBM. However, even with that lease now signed, our late stage pipeline remains at a very healthy level. Speaker 200:16:00Our early stage pipeline is even more encouraging. So recall it takes time for that to translate to sign activity. In short, we remain optimistic about what lies ahead. As always, thank you to our hardworking and talented operations team for positioning us so well. I do want to extend a special thank you to our Tampa team. Speaker 200:16:23They are doing an incredible job with the recent hurricanes, not just during and after the storms, but as important leading up to them. They're proactive and professional approach to preparedness and support of one another was second to none and a big reason our properties performed so well with only minor damage. Kennedy? Speaker 300:16:44Thanks, Richard. Good morning, everyone. The acceleration in our leasing activity is coinciding with an acceleration of investment activity. I'm pleased to discuss 2 recently completed transactions, transactions that align with our core strategy to thoughtfully and accretively invest in Sunbelt lifestyle office environment. 1st, subsequent to quarter end, we acquired a mortgage loan that is secured by St. Speaker 300:17:08Ann Court, a 320,000 square foot Class A office assets built in 2,009 in the dynamic uptown Dallas sub market. The $138,000,000 loan was acquired at par, a basis of $4.31 per square foot. The loan has an initial maturity of December 7, 2024 24 and an interest rate of SOFR plus 366 basis points. At the time of the loan acquisition, the asset was 98% leased. As you are aware, we also recently acquired 2 mezzanine loans as a way to allocate capital and earn an attractive risk adjusted return during a time period in which the office sector has continued to reprice and a bid ask spread often remains between buyers and sellers. Speaker 300:17:57This is a continuation of that a bridge. In addition, in August, we acquired Fresenius, a 525,000 Square Foot Class A office building that is extremely well located at the intersection of Peachtree and 14th Street in the heart of Midtown Atlanta. We acquired the 2000 and 1 vintage building in an eightytwenty joint venture with Towne Lane for $83,000,000 or $158 per square foot on an all cash basis. Cousins owns the 20% interest and will provide property management, leasing and redevelopment services for the partnership. We're excited about this transaction for several reasons. Speaker 300:18:37First, the initial basis of $158 per square foot and opportunistic return profile is very compelling. This is reflective of the repricing that has occurred particularly for value add profile assets. The building has historically averaged above 90% leased, but with 74% leased at time of acquisition. With some long known move outs, the occupancy is projected to drop to approximately 50% over the next few quarters. As part of our acquisition, we are planning significant capital upgrades to modernize and reposition the building. Speaker 300:19:12These redevelopment efforts will begin in early 2025. This is a similar strategy that Cousins has successfully executed at several other properties recently, including the neighboring Promenade campus. And we're encouraged by early leasing interest in the building. All in, we anticipate that our stabilized basis will be less than half of today's placement costs, a significant competitive advantage. 2nd, we are excited to have executed this transaction with a fantastic partner in Town Lane. Speaker 300:19:42The joint venture allows us to participate in an attractive opportunistic investment in our backyard and leverage our strong development in Atlanta teams. Given the lease up and repositioning efforts needed, it'll take time for the investment to materialize into meaningful accretion. Therefore, partnering with Towne Lane on this transaction allows us to create long term value at the property level while maintaining significant acquisition capacity for other transactions that offer more near term accretion. Finally, we remain optimistic that this is just the beginning of an interesting transaction cycle for Cousins. One where we intend to press our competitive advantage. Speaker 300:20:22As Colin mentioned, asset level debt for office remains challenging to obtain and expensive. In the case of Fresenius, our ability to move quickly and close all cash with a highly regarded JV partner gave us a significant advantage over other interested parties. We continue to evaluate a variety of acquisitions and structured investments across our Sunbelt markets. Our guiding criteria is underlying assets that are or can be repositioned to be trippy lifestyle environments. We have ample capacity to acquire assets on our own and we'll also evaluate investment opportunities with like minded joint venture partners where it makes sense. Speaker 300:21:01I will turn the call over to Greg. Speaker 400:21:05Thanks, Kennedy. I'll begin my remarks by providing a brief overview of our results, spending a few minutes on our same property performance, then moving on to our capital markets and development activity before discussing our balance sheet and closing my remarks with an update to our 2024 earnings guidance. Overall, as Colin stated upfront, our 3rd quarter results were outstanding. 2nd generation cash leasing spreads were positive for the 42nd straight quarter. Leasing velocity was excellent and same property year over year cash NOI increased. Speaker 400:21:42It was also a very clean quarter. There were no significant unusual or non recurring items of note. Focusing on same property performance for a moment, GAAP NOI grew 4.2% and cash NOI grew 4.4% during the Q3 compared to last year. This continues a string of positive same property numbers that began in early 2022 with the most recent quarterly cash increases largely driven by occupancy gains at our San Jacinto building in Austin as well as our 100 Mill and Tempe Gateway buildings in Phoenix. I also wanted to take a moment to point out the lumpiness that can sometimes run through our quarterly same property expense numbers, oftentimes driven by property taxes. Speaker 400:22:30Property tax true ups as we receive actual assessments from the taxing authorities can push the quarterly numbers around quite a bit. So it's always best to use longer term timeframes when looking at expense numbers. Moving on to our capital markets activity. After receiving our investment grade credit ratings from Moody's and S and P in the Q2, we completed our inaugural unsecured bond issuance in the Q3. In mid August, we issued $500,000,000 of 5.7eight notes to 2,034. Speaker 400:23:04Investor demand was strong and it was widespread with over 100 investors submitting orders for $3,000,000,000 Subsequent to closing the offering, pricing on our bonds in the secondary markets have improved significantly. And as Colin said earlier, our bonds now trade at the tightest spread to treasuries among all traditional office REITs, providing us with a critical cost of capital advantage. Turning to our development efforts, the current pipeline is comprised of a 50% interest in Newhall in Nashville and 100% of Domain 9 in Austin. Our share of the remaining estimated development costs is approximately $50,000,000 which will be funded by a combination of our Newhall construction loan and our operating cash flow. We've revised the estimated stabilization of the commercial space in Newhall from the Q4 of 2025 to the Q2 of 2026. Speaker 400:24:01Construction is on schedule and leasing remains generally in line with our original underwriting. However, customer move in dates are a bit later than we originally forecasted. Looking at our balance sheet, net debt to EBITDA is an industry leading 5.1 times and our liquidity position is excellent. We ended the quarter with nothing outstanding under $1,000,000,000 credit facility and over $76,000,000 in cash and cash equivalents. We have ample balance sheet capacity as we explore the attractive transaction market Collin and Kennedy discussed earlier. Speaker 400:24:37I'll close by updating our 2024 earnings guidance. We currently anticipate full year 2024 FFO between $2.66 $2.70 per share with a midpoint of $2.68 This is up $0.025 from the prior guidance we provided in July and up $0.06 from our original guidance. The most recent increase is driven by lower short term interest rates, lower real estate taxes as we realize favorable assessment outcomes and new investment activity. Our earnings guidance remains clean. There are no speculative property acquisitions, property dispositions, development starts or capital markets transactions. Speaker 400:25:20If any of these do take place, we'll update our earnings guidance accordingly. Our guidance assumes the mezzanine loan on the Radius property in Nashville that we acquired during the Q2 is paid off at par prior to year end. The loan has a maturity date of June 2025. However, the borrower is currently pursuing an early refinancing and we assume Speaker 200:25:44they will be successful. Speaker 400:25:46It's a floating rate loan and open to prepayment with no penalty or defeasance. Our guidance also assumes the whole loan we just acquired on the St. Anne Court property and balance is paid off at par on the maturity date of December 7. Bottom line, our Q3 results are excellent and we are increasing earnings guidance for the 3rd straight quarter. I believe we are one of the few office REITs to forecast positive FFO growth in 2024. Speaker 400:26:15Our best in class leverage and liquidity position remains intact. Office fundamentals continue to improve with accelerating leasing activity and declining new supply and we continue to deploy capital into compelling and accretive investment opportunities. We were in the early innings of what is often a very productive part of the cycle for office owners and we enter it with a significant cost of capital advantage. We look forward to reporting our progress in the coming quarters. With that, I'll turn the call back over to the operator. Operator00:26:56Thank Your first question comes from Jeff Spector with Bank of America. Speaker 500:27:18Great. Good morning and congratulations on the quarter. First question, if we can focus on your comments around optimism around the transaction cycle. Are you planning to continue to leverage your current footprint in Teams? Do you see yourself looking into other Sunbelt markets? Speaker 500:27:42If you can talk about that a little bit more. Speaker 200:27:46Great. Good morning, Jeff. I would say that we are very constructive on the investment environment today for Lifestyle Office and we do remain very focused on the Sunbelt footprint that we operate in today. We're always evaluating new markets within the Sunbelt. I'd mentioned Raleigh, Speaker 600:28:10Durham, Metro and South Florida Speaker 200:28:10as markets that we continue Durham, Metro and South Florida as markets that we continue to evaluate. But I really wouldn't characterize them as new markets. We've been invested in both of those in the past. And so we'll continue to look at those. I would say there's nothing imminent in those markets. Speaker 200:28:27As today, we really don't feel opportunity constrained in the markets that we've got a presence in today and in boots on the ground. Speaker 500:28:38Thank you. And then my second question, I know you've talked you've compared a couple of times to 2019, which I assume is purposeful. So in terms of occupancy levels, can you provide any more color there? I know you talked about how 25 may play out, but I guess big picture, where do you you've compared again this quarter to 2019. 2019 was a very strong year. Speaker 500:29:08Can you talk a little bit more about that and maybe even tie in thoughts around concessions and free rent? Thank you. Speaker 200:29:17Sure, Jeff. It's Colin again. I think we continue to refer to 2019 in that in our performance today, if you were to strip out the year 2024 and compare our results to pre pandemic of 2019 as it relates to leasing volumes, net effect of rents, etcetera, it's kind of at or better. And so at Cousins, we're spending less time talking about return to office and more time about returning to normal. And our customers are back more in force. Speaker 200:29:56The leasing demand is running parallel with that. And so we believe that our occupancy today that was really less COVID related and some specific discrete move outs that we've dealt with over the last couple of years and one next year. But we believe we can return this portfolio to normalized levels of occupancy and that's certainly north of 90%. That might take us a year or 2 to reach those goals. And but the quality of the portfolio that we own today, the lifestyle portfolio that Bank of America, we appreciate ranking number 1 across all REITs is certainly has the capacity to do that. Speaker 200:30:38And I think broadly speaking, the office market as a whole is going to stabilize. You're going to see lower quality properties candidly disappear and repurposed while the highest quality buildings fill back up and that process is certainly underway today. And so that gives us a lot of optimism. And again, I think the performance of the company in 2024 largely mirrors or exceeds what we were where we were in 2019. Speaker 500:31:09Thank you. Operator00:31:12Your next question comes from Blaine Heck with Wells Fargo. Your line is now open. Speaker 700:31:18Hey, thanks. Good morning. Can you talk a little bit more about the St. Ancort mortgage acquisition? It's got a maturity date that's right around the corner. Speaker 700:31:27I know what Greg just said is in guidance. But can you run us through any of the potential alternative scenarios and whether you think there's much probability that something other than being paid back at maturity happens? Speaker 200:31:41Yes. Well, Blaine, let me just again step back again and strategically kind of highlight how we're looking at the market today, which again I've mentioned how constructive we are on lifestyle office for the obvious supply and demand reasons. At Cousins, we have while we certainly have an equity bias, we have a list of target buildings in our markets that we think are consistent with our lifestyle office criteria. And as we evaluate those buildings in this environment, we're willing to look across the capital structure so that we invest at the appropriate basis and with compelling risk adjusted returns. And so over the course of 2024, we've acquired 2 mezzanine loans, now one whole loan. Speaker 200:32:32We've done a joint venture acquisition and we'll continue to look at a wide spectrum of opportunities. You noted in the particular St. Ann Court loan that that does mature in December of this year. I'd say it's still way too early to speculate on that. But on the mezz and whole loans, our expectation is that we'll ultimately be paid off at maturity. Speaker 200:32:57However, those outcomes are still uncertain. And I think ultimately if the borrower does not pay us off, we'll certainly assess our rights and remedies and be prepared to take appropriate action. We're highly comfortable in the quality of the collateral in our loan basis, but I think it's just too early to speculate and I can't comment any specific conversations beyond that today. Speaker 700:33:23Okay. That's really helpful, Collin. And maybe just sticking with you here. I mean, as you guys kind of first made the decision coming out of the pandemic to really gather up dry powder for investment and commented on your intention to find ways to invest in the dislocated market. It seemed as though kind of everything was on the table, including large portfolio or even entity level transactions, which Cousins has done in the past. Speaker 700:33:50Is that still the case? Could we see anything, any kind of large transactions, portfolio transactions, entity level transactions? Or do you think in this environment, it's probably more likely to be one off smaller deals? Speaker 200:34:06Yes. Look, again, we're going to continue to be creative at Cousins in terms of how we access in complete transactions, again, focused on the appropriate basis and compelling risk adjusted and accretive returns and we're going to be flexible in how we invest. And I certainly in the early part of the cycle, as Kennedy mentioned, with bid ask spreads, you've got to be a bit more creative. I do think that we are starting to see private market values and public market values converge. And so we do think that's going to open up an opportunity to consolidate assets, more traditional property acquisitions. Speaker 200:34:55And that's certainly an opportunity to take a bespoke approach and really curate and select the right assets to add to the portfolio. We're again, we'll always evaluate any and all opportunities. But I do think probably the near term opportunity that's going to open up for us is in the property acquisition arena. Speaker 700:35:20Okay, great. Thanks Collyn. Speaker 600:35:23Thanks Blaine. Operator00:35:25Your next question comes from Anthony Paolone with JPMorgan. Your line is now open. Speaker 800:35:32Yes, thanks. I guess first just with the discussion about the desirability of just the best assets and you having a decent amount of activity there. Is there any prospect of build to suits or activating any of the development land in the near term? Speaker 200:35:52Sure, Tony. We are starting to see more or having more discussions with customers about their future real estate needs that could include build to suits and or other types of development. And I think in today's current capital markets, the challenge is with construction costs and the cost of capital, being able to find a balance and the appropriate return and rent that works for existing customers. So I do think you're going to see similar to the situation with IBM where existing buildings are going to fill up 1st, but I don't think development is that far behind. And I do think it's again very encouraging some of the conversations that we're having with customers who are thinking longer term, very specific about their space needs. Speaker 200:36:56And I think you'll see development in very select submarkets like The Domain as an example, be really not that far off. Speaker 800:37:07Okay. Thanks. And then just second one, as you think about 2025, can you maybe talk about what the mark to market looks like right now on the leases coming due and just how you think that might look? Speaker 200:37:26Sure, Johnny. I can't comment specifically on 2025 that will ultimately be dictated by which specific deals are completed, what renewals we do, what early renewals that we do. But again, I think we remain confident that we have an opportunity to consistently roll up rents. And again, to what degree will vary quarter to quarter, but I think this marked our 42nd straight quarter of roll ups and we're optimistic that we can continue that into 2025. Speaker 600:38:00Okay. Thank you. Operator00:38:03Your next question comes from John Kim with BMO Capital Markets. Your line is now open. Speaker 900:38:11Good morning. There was commentary I think Richard made on the Austin market and 2 large leases signed in the Q3. We all know about the IBM lease, but I was wondering who that second lease was with. Speaker 600:38:22And if you could just Speaker 900:38:23discuss the health of tech leasing in the market. Do you know that NVIDIA is looking for space and wondering if there's other large tech leases out there currently in the market? Speaker 200:38:39Sure. So the 2nd lease is PayPal, who signed a significant expansion at Domain Tower 2, which is on the fringe just outside of the core of the domain. So it kind of dovetails with the second part of your question regarding tech sector activity. I think that's again an example of a technology company making a long term decision and to increase their presence. And we know of a number of other technology companies that we already do business with and some others that we don't currently do business with that are searching in the Austin market specifically. Speaker 200:39:19So we feel good about the amount of activity that's starting to come to fruition. Speaker 900:39:28Okay. And then following up on the St. Ann Court mortgage debt, Have you been in contract with the owner, Harwood? And can you discuss where you think they're at as far as potentially opening up a relationship with you? Speaker 200:39:45Sure, John. As I mentioned earlier, we need to maintain confidentiality relative to any discussions we have with our borrowers across any of the loans that we own. And again, I think it's just too early to speculate. And certainly we'll continue to keep you up to date as these evolve. But I certainly need to maintain confidentiality relative to any discussions we may or may not have. Speaker 900:40:21I know Greg mentioned that it's you're assuming that mortgage debt gets paid off, but I imagine you're not making this investment just for 5 or 6 weeks of accretion. I'm just wondering that commentary was for guidance purposes or is that what you think will actually happen? Speaker 200:40:39Well, again, our we certainly need to make some assumption as it relates to our guidance. And again, our expectation on any and all loan investments that we make, we are going to within our guidance make it our expectation that we are paid off at maturity. Again, these outcomes are uncertain, but we felt like that was the appropriate assumption to make. And ultimately if a borrower does not pay us off, as I mentioned earlier, we'll assess our rights and remedies and go from there. Speaker 600:41:18Great. Thank you. Operator00:41:24Your next question comes from Nick Thielman with Baird. Your line is now open. Speaker 200:41:30Hey, good morning. First, I wanted to touch on the leasing pipeline, the kind of late stage pipeline that we got between new and renewal leasing. Richard, if you had that? Yes. So the mix is still leaning in our pipeline toward new and expansion leasing. Speaker 200:41:51On average over a long arc of time, it's more like a fifty-fifty mix, but we're still leaning toward new and expansion. A lot of that, I would note is driven by the fact that we still remain in a very good position from an exploration profile perspective. So we're going to naturally because of that, have more new and expansion activity. Helpful. And then Greg wanted to touch a little bit on some of the 2 large pending vacancies within the portfolio. Speaker 200:42:21What you're assuming for redevelopment costs for maybe 5th Third and if there's any additional spend needed at North Park with 1 Trust leaving? Speaker 400:42:31Sure. So we've talked about this several times on previous calls. We're still finalizing our plans in the 5th Third redevelopment in Charlotte. I think we'll have really specific or more specific answers for you in our February call. But as we sit here today, it's very likely to look like and cost like previous redevelopments that we've done. Speaker 400:42:53For example, Promenade in Atlanta would be a good example. But we'll have more details for you on that development in the February call. On North Park, I'm going to let Richard talk about North Park about that. Speaker 200:43:06Sure. I mean, we I would say stepping back, we are constantly evaluating every property in our portfolio, whether we need to be making improvements proactively to help drive leasing, help maintain quality at the level that we think our customers deserve and demand. And so specifically to North Park, we are actively looking at some improvements that we can make primarily around amenities in light of the OneTrust expiration in the Q1 of next year. But we have a handful of other properties where we are proactively making or reinvesting, if you will, across multiple markets. And this is Colin. Speaker 200:43:49I'll just add kind of some additional color, that I think kind of highlights the portfolio today is, if you'll recall, we sold over $1,000,000,000 of I'd say our lowest quality office from 2020 to 2022 and those were the assets probably that needed the highest amount of capital. And then over the last several years, we have substantially reinvested in buildings like Promenade, buildings like Hayden Ferry, 3,350 Peachtree, etcetera. So while we continue to evaluate some renovations and upgrades to properties like 5th Third and North Park, the portfolio overall is in terrific shape and high quality really from top to bottom. And so we think our portfolio and the amount capital needed relative to some others is just in a really good place. Speaker 600:44:49That's it for me. Thank you. Operator00:44:52Your next question comes from Yupal Rana with KeyBanc. Your line is now open. Speaker 600:44:59All right. Thank you. Speaker 500:45:01Colin, you talked about reaching 90% occupancy at some point in the future. Given you talked about some downdraft in occupancy through 3Q next year, do you feel like you're still on track to reach 90% occupancy and maybe even possibly 2026? Speaker 200:45:19Look, we're not going to set specific dates. But I do think once we I think the Bank of America expiration again, which has been long known, as we kind of hit that, I think that will certainly be a trough in occupancy and the pipeline of leasing in front of us and what we've already done, our hope is to recover that in very short order. And I did mention in 2026, we do have, I'd say fairly modest expirations through 2026. And so I think that's going to allow us to really move occupancy late in the second half of twenty twenty five and then certainly into 2026. But I'm just not prepared to put a specific date on it yet. Speaker 200:46:06But I do think certainly 90% is absolutely a goal of the company. I do think it's very achievable and ultimately our goal is to drive occupancy beyond 90% to as I said more stabilized levels. Speaker 500:46:25Okay, got it. That was helpful. And then, just quickly on the IBM lease, I was wondering if you can give us some color on how that took place and what's Meta's plans in the rest of the Austin market going forward? Speaker 200:46:40So again, the IBM lease, I think highlights the still the current challenges in the private capital markets. And some of you might recall that IBM actually had a signed lease to anchor a new development just adjacent to the domain that also had some speculative space and ultimately were unable to obtain Meta and ultimately find a really a win win win for Cousins, IBM and Meta. And I think it's terrific transaction. I think again, kind of highlights my earlier comments that I think we're going to see customers from a cost effectiveness find ways to utilize high quality space that's currently available and that will ultimately tighten the market and then lead to new development. But a terrific transaction for the company and I think all are excited about the outcome. Operator00:48:00Your next question comes from Peter Abramowitz with Jefferies. Your line is now open. Speaker 900:48:08Thank you Speaker 1000:48:09very much. Yes, one of your peers this quarter mentioned an uptick in interest for build to suits in a lot of the Sunbelt markets. Just curious if those conversations are picking up for you as well and if that's kind of part of the opportunity set you're considering with the capital you've raised? Speaker 200:48:30It is. I still believe that near term kind of acquisitions Speaker 600:48:33and investments are the most likely path Speaker 200:48:33for new investment for us. Regarding new development and build to suits are happening. And again, those conversations and discussions regarding a project like that usually start 1 to 2 years out before ultimately commencing. So as I said, those conversations are starting. If I had to speculate on how our investment activity would sequence, I think we'll see a period of time where investments are very attractive. Speaker 200:49:09But I'm excited that our team is are having those conversations so that in a year or 2 down the road, perhaps as the acquisition market becomes less compelling, we're ready to go with some highly attractive and hopefully pre leased development opportunities to continue a really attractive long term growth profile. Speaker 1000:49:33Thanks, Collin. And then just to go back to your comments around the dislocation between the public and the private market. I guess maybe a philosophical question, if you kind of step back and look at the environment, your cost of capital in the public market is pretty favorable. And like you said, things are pretty challenging in the private market. I guess, do you see anything that could sort of change that dynamic, particularly on the private market side and cause things to converge? Speaker 1000:50:02Or is there anything out there that maybe you think about could sort of change that dynamic over the next year or so? Well, it Speaker 200:50:12I mean, ultimately markets converge and 12 months ago, you would probably say the private side still had a more advantageous cost of capital than the public. I think that's probably reversed itself today, but longer term they'll likely converge. But I think that will take some time and part of that dislocation on the private side is so many private players, both debt and equity have their own share of legacy issues. And on the private side, those take longer to resolve than in the public market where there can be kind of instant liquidity. And so I do think that that is kind of the governor at the moment on private capital is trying to work through and clear their existing portfolio challenges before they're in a position to allocate new capital into the office sector. Speaker 1000:51:14All right. That's helpful. That's all for me. Thanks. Operator00:51:18Your next question comes from Dylan Brzezinski with Green Street. Your line is now open. Speaker 600:51:26Hi guys. Thanks for taking the question here. And not to beat a dead horse on a state and court loan, but just sort of curious, you talked about likely being paid off at maturity or that's being what's implied by guidance or possibly assessing your rights and remedies if you don't get paid off, but just sort of trying to get a sense for your appetite to extend this loan possibly at maturity? Speaker 200:51:51Look, we're going to again, any discussions and possible paths until those ultimately play out, we're going to continue to demand confidentiality and certainly those are just conversations that have to happen between borrower and lender. But again, I think I go back to this is we are highly comfortable in the quality of the collateral and the loan basis and there's a wide variety of outcomes. 1, as we mentioned that we are assuming in our guidance is that it's paid off and we'll continue to use that as our assumption and expectation and we'll continue to reevaluate as the process plays out and it could be fluid. Speaker 600:52:47And I guess as you guys are evaluating other investment opportunities, are there certain markets where you're seeing just a higher investable universe today given where either just more appetite in terms of sellers wanting to hit any bid that's there, whether it's on the debt or equity side? Speaker 200:53:06No, I'd say across our footprint, we think that there'll be opportunity. I think for us, it's important to note that all over the long term, we do want to continue to enhance our geographic diversification and grow our market share in places like Charlotte, in Nashville, in Dallas. We have a lot of conviction across all of our markets, including Atlanta and Austin. And so in this kind of unique period of time, we're going to invest opportunistically in any of our markets when we think really attractive situations come up where we can invest in high quality lifestyle office at attractive basis with compelling risk adjusted returns and we hope some kind of near to medium term accretion. Speaker 600:54:01Great. Appreciate those details, Collyn. Thank you. Thank you. Operator00:54:08Your next question comes from Brendan Lynch with Barclays. Your line is now open. Speaker 1100:54:14Great. Thank you for taking my question. There's great outcome between Meta and IBM and it sounds like tech demand in Austin is pretty strong. But do you anticipate any other tech tenants will scale back square footage within your portfolio? Speaker 200:54:33This is Richard. No, we don't anticipate any other significant scaling back. Speaker 1100:54:40Okay, great. Thanks. One quick one on St. Ann Court. The initial maturity date is in December, but is there an embedded extension option that you could discuss? Speaker 200:54:54There are certain extension options embedded in that required certain thresholds that will be met and unfortunately we just can't provide any more specifics beyond that. Speaker 1100:55:07Understood. And maybe one other quick one. It sounded like taxes were a consideration in the cash same property NOI coming down a little bit relative to the first half. Just wondering if there's anything else specific that you could call out that might be behind that decline? Speaker 400:55:28It's Greg. No, that was the largest component by far. Speaker 600:55:34Okay, very good. Thank you. Operator00:55:41Your next question comes from John Kim with BMO Capital Markets. Your line is now open. Speaker 900:55:48Thanks for taking a follow-up. I wanted to comment sorry, follow-up on your commentary on the BofA lease at Charlotte. You mentioned some short term direct leasing you've done with the sub lessee. I was wondering if you could provide any color as far as how long that term was and if there's any mark to market? Speaker 200:56:09Sure. The mark to market was more like a customary escalator kind of in line, so that really didn't move the needle at all. But the it's a 2 phased extension, if you will. So one of the floors will be expiring at the end of 2025 and then the balance will expire at the end of 2026. Speaker 900:56:34Are there any other opportunities to go direct with other sublease tenants? Speaker 200:56:40No, no. That really is the only one as far as going direct with subletsees. So a fairly unique situation, but I would say that we have very encouraging tour activity already even though BofA is yet to vacate the space. And Charlotte is pretty compelling from an early stage leasing pipeline perspective. Speaker 900:57:03Okay. And then we noticed that the $9,600,000 bankruptcy claim to SVP is no longer mentioned in your supplement. I realize it wasn't part of your guidance to begin with, but I was wondering what the status of that was? Speaker 400:57:18It's Greg. The bankruptcy process continues along slowly as they always are. But we still have that unsecured claim out there for $9,600,000 The bonds are still trading in a secondary market between kind of $0.55 $0.60 in the dollar. So that's still out there. It's just not in any of our guidance. Speaker 600:57:41Okay. Thank you. Operator00:57:44There are no further questions at this time. I will now turn the call over to Collin for closing remarks. Speaker 200:57:51Thank you all for joining us this morning and your interest in Cousins Properties. Please feel free to reach out to Greg and or Ronnie with any questions or follow-up. And we hope to see many of you out in Las Vegas at the NAREIT conference in November. Have a great day. Operator00:58:11Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read morePowered by